Playbooks / Property
Rent or buy in Dubai
How many years before buying beats renting in Dubai?
At flat prices the crossing is year 11, and the consensus answer needs capital growth to be true rather than arithmetic. Three rates are missing because at -1% a year and below owning never costs less inside the twenty-five year term, and a bar cannot say never.
The rule
"Rent is money down the drain" is the most expensive sentence in personal finance, because the sentence that answers it is not "so buy" but "so is most of a mortgage payment".
A mortgage payment splits in two. The principal repayment is a transfer from your bank account into your own equity: you still have that money, it just lives in a wall now. The interest is gone. So is the service charge, so is maintenance, so is the return your deposit would have earned had it stayed invested. Those are the unrecoverable costs of owning, and they are what rent should be compared against.
That much is the standard framework and almost every page on this question gets it right. Then they all stop at the same two sentences: renting wins under three years, buying wins after three to five. The range is asserted on every page and computed on none of them. One of the pages that does show its working gets to "3 to 4 years" by assuming capital appreciation of "20-30% annually". That is not an analysis with an assumption in it. That is the assumption, with an analysis wrapped around it.
So here is the number, computed, with nothing growing at all.
The answer first
The same illustrative one bedroom this site uses everywhere: AED 1,500,000, 900 square feet, which lets for AED 105,000 a year. One person rents it. The other buys it with a 75% mortgage at an illustrative 4.5% over 25 years. Prices flat, the rent index flat, running costs flat, and a 5% return available on money not tied up in property.
Owning costs less than renting from year 11.
Not year three. Not year five. Year eleven, and the arithmetic is below, line by line, so you can disagree with an input rather than with a conclusion.
What a year of renting actually costs
Pages that put this comparison in a table write the renter's transaction costs as nil, on the grounds that a tenant "pays no transaction fees". A tenant in Dubai pays four things that are not rent, and three of them are published by the authority that charges them.
| Renting, year one | AED |
|---|---|
| Rent, as the decree permits it | 105,000 |
| Lease commission, with VAT, first year only | 5,513 |
| Tenancy contract registration | 177.75 |
| Utility connection, first year only | 155 |
| Return forgone on the deposits held | 363 |
| Total | 111,208.75 |
The registration figure is exact because the Land Department prints the lines. Registering through the Dubai REST app or the Department's website costs AED 100 for registering a tenancy contract, plus AED 10 knowledge fee, plus AED 10 innovation fee, plus a service partner fee of AED 55 which, being a partner's fee rather than the Department's, carries VAT. That adds to 177.75, which is the total the Department itself publishes. Through a trustee centre the partner's fee is AED 95 and the same lines add to 219.75, where the Department prints 220. Twenty-five fils is not a scandal. It is a useful demonstration that the published total is a total of published lines, which is more than can be said for most of the figures in this market.
The utility connection is the same kind of arithmetic: AED 125 for connecting electricity and water (small meters), plus AED 10 each for registration, knowledge and innovation, giving the AED 155 the utility's own FAQ quotes.
The two deposits are refundable, so they are not costs. What they cost is the return they do not earn while they are held, which is the AED 363 line and is the only honest way to carry them. Here the two sides are not symmetrical, and the asymmetry is in the utility's own wording: a tenant's deposit comes back at move-out, whereas Security deposit for property owners will be refunded upon sale of the premise only. An owner carries that deposit for the entire hold. It is AED 2,000, so it changes nothing, and it is worth knowing that the page you are reading checked.
The lease commission and the security deposit are the two lines no instrument sets. The Dubai convention is 5% of the annual rent for each, and this page computes the convention and says plainly that it is one.
One line is missing from the table on purpose. A renewal commission is charged in this market and should not be. The Land Department's own judicial arm, the Rental Disputes Centre, says landlords and their representatives "are prohibited from claiming any fees at the time of renewing the lease with the tenant", that "the imposition of such fees is a defilement", and that "it is not permissible to file a claim for eviction over its non-payment". The same statement concedes that "there is no clear provision in the current law", so this is the position of the body that would hear the dispute rather than a provision you can point at. That is still a great deal more than most tenants are told, and it is why the renter's table carries a commission in year one and in no year after it. The two service pages behind this table, and every other instrument this site computes from, are indexed in the register of Dubai property law.
What a year of owning actually costs
| Owning, year one | AED |
|---|---|
| Interest on the loan | 50,115 |
| Service charge | 16,200 |
| Maintenance reserve | 5,250 |
| Insurance and fixed costs | 1,500 |
| Return forgone on the capital in the walls | 18,750 |
| Return forgone on the utility deposit | 100 |
| Total | 91,915 |
No principal, because principal is not a cost. No management fee and no vacancy allowance, because nobody is letting it: that is what makes this page different from the net rental yield arithmetic, which is the same apartment seen by an investor.
On these numbers a year of owning is AED 19,294 cheaper than the first year of renting and about AED 13,500 cheaper than every year after it. That gap is the whole case for buying at flat prices, and it has to pay off the two things the table above does not contain.
The part that decides it
| One-off, and unavoidable | AED |
|---|---|
| Getting in, the acquisition stack | 96,220 |
| Getting in, registering the mortgage | 7,283 |
| Getting out in year 11, the disposal stack | 41,069 |
| Round trip | 144,572 |
The entry stack is 6.90% of the price and is itemised to the instrument that sets each line on the net rental yield page, where the 4% registration fee turns out not to be a buyer's fee at all. The exit stack is itemised on selling well. It is worth noticing that the exit is not a constant: the early settlement charge is a percentage of the balance still outstanding, so the same sale costs AED 43,285 in year three and AED 41,069 in year eleven. A longer hold is a cheaper exit as well as a more amortised one. Changing the loan rather than the property has its own stack, and moving a mortgage to another bank costs more than the capped fee everyone quotes.
Divide a round trip of roughly AED 145,000 by an annual saving of roughly AED 13,500 and you are at eleven years. That is the entire result, and it is why the minimum hold period is the output of this question rather than a footnote to it.
The three to five year claim, priced
The consensus answer is not absurd. It is a growth bet that nobody labels as one. Here is the capital growth rate each break-even year requires, searched rather than assumed:
| Capital growth a year | Owning is cheaper from |
|---|---|
| -3% | Never |
| -2% | Never |
| -1% | Never |
| 0% | 11 |
| 1% | 5 |
| 2% | 4 |
| 3% | 3 |
| 5% | 2 |
Read the other way: breaking even by year five needs 0.99% a year, and by year three needs 2.24% a year. Those are modest numbers. The honest objection to the three-to-five-year consensus is therefore not that it is wrong, but that it is a forecast wearing the clothes of an arithmetic result, and it collapses in a particular direction.
Look at the top three rows. At minus one per cent a year, buying never becomes the cheaper decision inside a 25-year term. Not "takes longer". Never.
That matters here more than it would elsewhere, because this site publishes the index. The Land Department's residential sale price index fell 18.1% between May 2015 and June 2021, which is -3.23% a year compounded over just over six years, and it then took 85 months to recover its May 2015 peak. A buyer who began in May 2015 spent that entire stretch inside the top row of the table above. The figures and the series are on the price index page, which also shows the surge that followed at 16.17% a year. Both legs are real. A page that shows you only the second one is selling.
What the rent cap does, which nobody models
Every competing page mentions that increases on a sitting tenant are capped and then quietly models the renter as paying the market rent. Those are different numbers, and Decree 43 of 2013 makes the difference permanent.
A tenant signs at the index, so the first renewal shows no gap and no increase is permitted. The index moves on and the tenant's rent does not, until the gap crosses into the next band. Then the permitted increase narrows the gap the tenant had just opened, and the ladder settles into a steady state below the index that it never leaves. With the index growing at 5% a year:
| Index growth | Capped tenant pays less from | A tenant on the index would from | Years the cap adds | Settled gap to the index |
|---|---|---|---|---|
| 0% | 11 | 11 | 0 | 0.0% |
| 2% | 10 | 8 | 2 | 8.1% |
| 3% | 9 | 7 | 2 | 11.7% |
| 5% | 8 | 6 | 2 | 13.6% |
Two findings sit in that table.
The first is the top row. Under a flat index the decree does not slow a sitting tenant's rent, it freezes it outright: the gap stays at nil, the permitted increase stays at zero, and the rent in year twenty is the rent in year one. That is the quiet reason the flat-price case runs to eleven years.
The second is the column that matters. The rent cap adds two years to the buyer's break-even, at every rate of index growth tested. Rising rents push a renter toward buying, exactly as every page on this subject says, and Decree 43 removes about two years of that push. A comparison that models the renter at the index rather than on the ladder is not slightly optimistic about buying. It is two years optimistic, every time.
The two inputs that matter more than growth
Capital growth gets all the attention. On this arithmetic it is not the most dangerous input.
| Mortgage rate | Owning is cheaper from |
|---|---|
| 3.5% | 6 |
| 4.0% | 8 |
| 4.5% | 11 |
| 5.0% | 17 |
| 5.5% | Never |
| 6.5% | Never |
| Return available elsewhere | Owning is cheaper from |
|---|---|
| 2% | 6 |
| 3% | 7 |
| 4% | 8 |
| 5% | 11 |
| 6% | Never |
| 7% | Never |
Half a point of mortgage rate is worth six years. A point of opportunity cost removes the answer from the term. Both tables hold the price flat, so they are showing the sensitivity of the comparison itself rather than of a growth forecast, and both are inputs a buyer actually knows on the day. Neither appears on any page that confidently asserts three to five years.
The opportunity rate is the one people get wrong in their own favour. It is not a savings account. It is what your money would earn at risk comparable to a leveraged position in a single undiversified asset in one city, which is a high bar, and the honest number is uncomfortable. What diversification does is the argument; this table is the price.
So what is the five percent rule worth
The shorthand is still useful as a first pass. Ben Felix's formulation, published by PWL Capital and linked below, puts unrecoverable ownership cost at about five percent of value a year: one point of maintenance, one of property tax, three of cost of capital. Run it here and the UAE's missing property tax does not help as much as it sounds, because the service charge does that work instead.
| Component | Annual, AED | Share of value |
|---|---|---|
| Property tax | 0 | 0.00% |
| Service charge, maintenance, insurance | 22,950 | 1.53% |
| Interest on 75% debt at 4.5% | 50,115 | 3.34% |
| Return forgone on the equity | 18,850 | 1.26% |
| Total unrecoverable | 91,915 | 6.13% |
Six point one three per cent, not five. Against a rent of AED 105,000, which is 7.00% of the price, owning is cheaper per year, and that is exactly the result the five percent rule is supposed to deliver: rent above the unrecoverable rate, so buy.
And it is incomplete in the way that matters, because it hides the eleven years. The rule compares two annual flows and says nothing about the AED 144,572 round trip, which is 9.64% of the price and which no annual comparison can see. That is the thing the break-even hold period exists to price, and the price to rent ratio is the cheaper first pass at the same question. It is why the single most useful question is not "is renting or buying cheaper" but "how long do I have to stay".
Eleven years, at flat prices. Five, if the market gives you one per cent a year. Never, if it gives you minus one. Those are three different answers to the same question and the only thing that separates them is a number no page on this subject is entitled to promise you.
You can run it on your own figures in the rent versus buy calculator, and the input to change first is not the growth rate. It is how long you are honestly going to be here.
The arithmetic
Where it breaks
- The headline answer assumes nothing grows. That is not a forecast and it is not a neutral case either: it is the only version of the question that does not depend on the input nobody can know, which is why it is the one printed first. Every table below shows what growth does to it.
- A break-even hold period is not a recommendation. It is the number of years you have to stay for the buying decision to have been the cheaper one, and it is only useful next to an honest answer about how long you will actually be in the country.
- The mortgage rate and the opportunity rate are the reader's own, and the page is more sensitive to them than to anything else on it. Half a point of mortgage rate moves the answer by six years. A point of opportunity rate removes the break-even from the term altogether.
- It compares the same apartment let and owned, which is the only fair comparison and almost never the real one. People buy larger and better than they rent, and the difference is consumption rather than investment, however it is financed.
- The service charge is the illustrative AED 18 a foot, because Dubai publishes no per-building series this site is willing to quote. A building at AED 24 a foot is a different answer, and the figure is knowable before you buy from the Land Department's own service charge index.
- Running costs are held flat while the rent index is allowed to grow in the later tables, which favours owning. A service charge rising with the index would lengthen the break-even, and the honest reading of the growth tables is that they are the generous case for buying.
- The lease commission and the security deposit are conventions and no instrument sets either of them. They are negotiable in a soft letting market and they are not negotiable in a tight one, and the page computes them at the convention rather than pretending there is a rule.
- It ignores what the ability to leave in thirty days is worth to someone on a two year contract, because that is real, frequently decisive, and not a number.
- This is general information and not financial or legal advice.
When to use it
Before the first purchase, and again whenever your expected time in the country changes, because the break-even hold period is the only output of this question that survives contact with an unknown growth rate. Run it before you are shown a three to five year figure by anyone who is selling you something.
The Rent versus Buy does this arithmetic for you, in your currency, in about thirty seconds.
Open the calculatorSources
- Dubai Land Department, Register / Renew Tenancy Contract, service fees
- Dubai Electricity and Water Authority, Activation of Electricity/Water (Move-in), service fees
- Executive Council Resolution No. (30) of 2013 Approving Fees of the Land Department
- Decree No. (43) of 2013 Determining Rent Increase for Real Property in the Emirate of Dubai, Article 1
- Dubai Rental Disputes Centre, landlord is prohibited from claiming lease renewal fee
- PWL Capital, rent or own your home, the 5% rule
Last reviewed . Commercial relationship disclosure: the author works in Dubai real estate brokerage. See the disclosure standards. Disclosure standards.